2.

G.R. No. 80447 January 31, 1989

BALIWAG TRANSIT, INC., petitioner,
vs.
HON. COURT OF APPEALS and S-PS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and
GEORGE L. CAILIPAN, respondents.
Sta. Maria & Associates for petitioner.
Punzalan and Associates Law Office for respondents.

MELENCIO-HERRERA, J.:
On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was
filed by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their
son George, of legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The
Complaint alleged that George, who was a paying passenger on a Baliwag bus on 17
December 1984, suffered multiple serious physical injuries when he was thrown off said
bus driven in a careless and negligent manner by Leonardo Cruz, the authorized bus
driver, along Barangay Patubig, Marilao, Bulacan. As a result, he was confined in the
hospital for treatment, incurring medical expenses, which were borne by his parents, the
respondent Spouses, in the sum of about P200,000.00 plus other incidental expenses of
about P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries
sustained by George was solely attributable to his own voluntary act in that, without
warning and provocation, he suddenly stood up from his seat and headed for the door of
the bus as if in a daze, opened it and jumped off while said bus was in motion, in spite of
the protestations by the driver and without the knowledge of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company,
Inc., on its third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune
Insurance claimed limited liability, the coverage being subject to a Schedule of Indemnities
forming part of the insurance polic+y.
On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag
each filed Motions to Dismiss on the ground that George, in consideration of the sum of
P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These Motions were
denied by the Trial Court in an Order dated 13 January 1986 as they were filed beyond the
time for pleading and after the Answer were already filed.
On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted
by the Trial Court. The Amended Answer incorporated the affirmative defense in the Motion
to Dismiss to the effect that on 16 May 1985, George bad been paid all his claims for
damages arising from the incident subject matter of the complaint when he executed the
following "Release of Claims":
For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND
TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby
acknowledged, I/we, being of lawful age, do hereby release, acquit and forever discharge
Fortune Insurance and/or Baliwag transit, Inc. his/her heirs, executors and assigns, from
any and all liability now accrued or hereafter to accrue on account of any and all claims or
causes of action which I/we now or may here after have for personal injuries, damage to
property, loss of services, medical expenses, losses or damages of any and every kind or
nature whatsoever, now known or what may hereafter develop by me/us sustained or
received on or about 17th day of December, 1984 through Reckless Imprudence Resulting
to Physical Injuries, and I/we hereby declare that I/we fully understand the terms of this
settlement and voluntarily accept said sum for the purpose of making a full and final
compromise adjustment and settlement of the injuries and damages, expenses and
inconvenience above mentioned. (Rollo, p. 11)
During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived
the presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release
of Claims" signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed
engineer.
By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr.
testified that be is the father of George, who at the time of the incident was a student, living
with his parents and totally dependent on them for their support; that the expenses for his
hospitalization were shouldered by his parents; and that they had not signed the "Release
of Claims."
In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch
20, 1 dismissed the Complaint and Third-party Complaint, ruling that since the contract of
carriage is between Baliwag and George L. Cailipan, the latter, who is of legal age, had the
exclusive right to execute the Release of Claims despite the fact that he is still a student
and dependent on his parents for support. Consequently, the execution by George of the
Release of Claims discharges Baliwag and Fortune Insurance.
Aggrieved, the Spouses appealed to respondent Court of Appeals.
On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed
Order and holding that the "Release of Claims" cannot operate as a valid ground for the
dismissal of the case because it does not have the conformity of all the parties, particularly
George's parents, who have a substantial interest in the case as they stand to be
prejudiced by the judgment because they spent a sizeable amount for the medical bills of
their son; that the Release of Claims was secured by Fortune Insurance for the
consideration of P8,020.50 as the full and final settlement of its liability under the insurance
policy and not for the purpose of releasing Baliwag from its liability as a carrier in this suit
for breach of contract. The Appellate Court also ordered the remand of the case to the
lower Court for trial on the merits and for George to return the amount of P8,020.50 to
Fortune Insurance.
Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court
judgment.
The issue brought to the fore is the legal effect of the Release of Claims executed by
George during the pendency of this case.
We hold that since the suit is one for breach of contract of carriage, the Release of Claims
executed by him, as the injured party, discharging Fortune Insurance and Baliwag from
any and all liability is valid. He was then of legal age, a graduating student of Agricultural
Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to
Article 402, Civil Code). Thus, he could sue and be sued even without the assistance of his
parents.
Significantly, the contract of carriage was actually between George, as the paying
passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to
carry its passengers safely as far as human care and foresight could provide, and is liable
for injuries to them through the negligence or wilful acts of its employees (Articles 1755
and 1759, Civil Code). Thus, George had the right to be safely brought to his destination
and Baliwag had the correlative obligation to do so. Since a contract may be violated only
by the parties thereto, as against each other, in an action upon that contract, the real
parties in interest, either as plaintiff or as defendant, must be parties to said contract
(Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14, 1987,
156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a real
party-in-interest-defendant is one who has a correlative legal obligation whose act or
omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28,
1988). In the absence of any contract of carriage between Baliwag and George's parents,
the latter are not real parties-in-interest in an action for breach of that contract.
The general rule of the common law is that every action must be brought in the name of
the party whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p. 484. "For the
immediate wrong and damage the person injured is the only one who can maintain the
action." Id. p. 578. The person who sustains an injury is the person to bring an action for
the injury against the wrongdoer." Dicey parties to Actions, 347. (Cited in Green v.
Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).
There is no question regarding the genuineness and due execution of the Release of
Claims. It is a duly notarized public document. It clearly stipulates that the consideration
of P8,020.50 received by George was "to release and forever discharge Fortune Insurance
and/or Baliwag from any and all liabilities now accrued or to accrue on account of any and
all claims or causes of action ... for personal injuries, damage to property, loss of services,
medical expenses, losses or damages of any and every kind or nature whatsoever,
sustained by him on 17 December 1984 thru Reckless Imprudence Resulting to Physical
Injuries." Consequently, the ruling of respondent Appellate Court that the "Release of
Claims" was intended only as the full and final settlement of a third-party liability for bodily
injury claim and not for the purpose of releasing Baliwag from its liability, if any, in a breach
of a contract of carriage, has to be rejected for being contrary to the very terms thereof. If
the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code). The
phraseology "any and all claims or causes of action" is broad enough to include all
damages that may accrue to the injured party arising from the unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was entered into
for the purpose of making a full and final compromise adjustment and settlement of the
cause of action involved. A compromise is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced (Article
2028, Civil Code). The Release of Claims executed by the injured party himself wrote finish
to this litigation.
WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET
ASIDE, the Decision of the Regional T
rial Court of Bulacan, Branch 20, is REINSTATED, and the Complaint and Third-Party
Complaint are hereby ordered DISMISSED. No costs.
SO ORDERED.
Paras, Padilla, Sarmien
3.

G.R. No. 111127 July 26, 1996

MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC.,
AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI
CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPES, JULIUS CAESAR,
GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-
MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA
CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE
Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.

MENDOZA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals1 in CA-GR No.
28245, dated September 30, 1992, which affirmed with modification the decision of the Regional
Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to private
respondent Amyline Antonio, and its resolution which denied petitioners' motion for
reconsideration for lack of merit.

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus.
They used the bus principally in connection with a bus service for school children which
they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981,
after trying him out for two weeks, His job was to take school children to and from the St.
Scholastica's College in Malate, Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc.
(WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults
Ministry from Manila to La Union and back in consideration of which private respondent
paid petitioners the amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon.
However, as several members of the party were late, the bus did not leave the Tropical Hut
at the corner of Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner
Porfirio Cabil drove the minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge
at Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it
being his first trip to La Union), was forced to take a detour through the town of Baay in
Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on
the highway, running on a south to east direction, which he described as "siete." The road
was slippery because it was raining, causing the bus, which was running at the speed of
50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel
brace and sign along the road and rammed the fence of one Jesus Escano, then turned
over and landed on its left side, coming to a full stop only after a series of impacts. The
bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its
front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the
floor of the bus and pinned down by a wooden seat which came down by a wooden seat
which came off after being unscrewed. It took three persons to safely remove her from this
portion. She was in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said
he was not familiar with the area and he could not have seen the curve despite the care he
took in driving the bus, because it was dark and there was no sign on the road. He said
that he saw the curve when he was already within 15 to 30 meters of it. He allegedly slowed
down to 30 kilometers per hour, but it was too late.

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis
of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case
was later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano
P1,500.00 for the damage to the latter's fence. On the basis of Escano's affidavit of
desistance the case against petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down. During the trial she described the operations she
underwent and adduced evidence regarding the cost of her treatment and therapy.
Immediately after the accident, she was taken to the Nazareth Hospital in Baay, Lingayen.
As this hospital was not adequately equipped, she was transferred to the Sto. Niño
Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray was taken
and the damage to her spine was determined to be too severe to be treated there. She was
therefore brought to Manila, first to the Philippine General Hospital and later to the Makati
Medical Center where she underwent an operation to correct the dislocation of her spine.

In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for travel to a
long distance trip and that the driver was properly screened and tested before being
admitted for employment. Indeed, all the evidence presented have shown the negligent act
of the defendants which ultimately resulted to the accident subject of this case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced evidence in support of their claim for damages,
the Court is therefore not in a position to award damages to the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against

defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles
2176 and 2180 of the Civil Code of the Philippines and said defendants are ordered to pay
jointly and severally to the plaintiffs the following amount:
 1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of

plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorney's fees;

6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to Amyline
Antonio but dismissed it with respect to the other plaintiffs on the ground that they failed
to prove their respective claims. The Court of Appeals modified the award of damages as
follows:

1) P93,657.11 as actual damages;

2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorney's fees; and

6) Costs of suit.

The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to
exercise due care and precaution in the operation of his vehicle considering the time and
the place of the accident. The Court of Appeals held that the Fabres were themselves
presumptively negligent. Hence, this petition. Petitioners raise the following issues:

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE

INJURIES SUFFERED BY PRIVATE RESPONDENTS.

III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN

THE POSITIVE, UP TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount
of P600,000.00. It is insisted that, on the assumption that petitioners are liable an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she
was a casual employee of a company called "Suaco," earning P1,650.00 a month, and a
dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners contend
that as casual employees do not have security of tenure, the award of P600,000.00,
considering Amyline Antonio's earnings, is without factual basis as there is no assurance
that she would be regularly earning these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case on the
theory that petitioners are liable for breach of contract of carriage or culpa contractual or
on the theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the
Court of Appeals held, for although the relation of passenger and carrier is "contractual
both in origin and nature," nevertheless "the act that breaks the contract may be also a
tort." 2 In either case, the question is whether the bus driver, petitioner Porfirio Cabil, was
negligent.

The finding that Cabil drove his bus negligently, while his employer, the Fabres, who
owned the bus, failed to exercise the diligence of a good father of the family in the selection
and supervision of their employee is fully supported by the evidence on record. These
factual findings of the two courts we regard as final and conclusive, supported as they are
by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was
raining, and as a consequence, the road was slippery, and it was dark. He averred these
facts to justify his failure to see that there lay a sharp curve ahead. However, it is
undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed
down when he noticed the curve some 15 to 30 meters ahead. 3 By then it was too late for
him to avoid falling off the road. Given the conditions of the road and considering that the
trip was Cabil's first one outside of Manila, Cabil should have driven his vehicle at a
moderate speed. There is testimony 4 that the vehicles passing on that portion of the road
should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was
running at a very high speed.

Considering the foregoing — the fact that it was raining and the road was slippery, that it
was dark, that he drove his bus at 50 kilometers an hour when even on a good day the
normal speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain,
Cabil was grossly negligent and should be held liable for the injuries suffered by private
respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were themselves negligent in the selection
and supervisions of their employee.

Due diligence in selection of employees is not satisfied by finding that the applicant
possessed a professional driver's license. The employer should also examine the
applicant for his qualifications, experience and record of service. 5 Due diligence in
supervision, on the other hand, requires the formulation of rules and regulations for the
guidance of employees and issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance with the rules.6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did
not consider the fact that Cabil had been driving for school children only, from their homes
to the St. Scholastica's College in Metro Manila. 7They had hired him only after a two-week
apprenticeship. They had hired him only after a two-week apprenticeship. They had tested
him for certain matters, such as whether he could remember the names of the children he
would be taking to school, which were irrelevant to his qualification to drive on a long
distance travel, especially considering that the trip to La Union was his first. The existence
of hiring procedures and supervisory policies cannot be casually invoked to overturn the
presumption of negligence on the part of an employer. 8

Petitioners argue that they are not liable because (1) an earlier departure (made impossible
by the congregation's delayed meeting) could have a averted the mishap and (2) under the
contract, the WWCF was directly responsible for the conduct of the trip. Neither of these
contentions hold water. The hour of departure had not been fixed. Even if it had been, the
delay did not bear directly on the cause of the accident. With respect to the second
contention, it was held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to
which he wishes to be conveyed, but exercises no other control over the conduct of the
driver, is not responsible for acts of negligence of the latter or prevented from recovering
for injuries suffered from a collision between the automobile and a train, caused by the
negligence or the automobile driver. 9

As already stated, this case actually involves a contract of carriage. Petitioners, the
Fabres, did not have to be engaged in the business of public transportation for the
provisions of the Civil Code on common carriers to apply to them. As this Court has held: 10

Art. 1732. Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air for compensation, offering their services to the
public.

The above article makes no distinction between one whose principal

business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as "a
sideline"). Article 1732 also carefully avoids making any distinction between
a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions.

As common carriers, the Fabres were found to exercise "extraordinary

diligence" for the safe transportation of the passengers to their destination.
This duty of care is not excused by proof that they exercise the diligence of
a good father of the family in the selection and supervision of their employee.
As Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through
the negligence or willful acts of the former's employees although such
 employees may have acted beyond the scope of their authority or in violation
of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.

The same circumstances detailed above, supporting the finding of the trial court and of
the appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict,
fully justify findings them guilty of breach of contract of carriage under Arts. 1733, 1755
and 1759 of the Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we

think the Court of Appeals erred in increasing the amount of compensatory damages
because private respondents did not question this award as inadequate. 11 To the contrary,
the award of P500,000.00 for compensatory damages which the Regional Trial Court made
is reasonable considering the contingent nature of her income as a casual employee of a
company and as distributor of beauty products and the fact that the possibility that she
might be able to work again has not been foreclosed. In fact she testified that one of her
previous employers had expressed willingness to employ her again.

With respect to the other awards, while the decisions of the trial court and the Court of
Appeals do not sufficiently indicate the factual and legal basis for them, we find that they
are nevertheless supported by evidence in the records of this case. Viewed as an action
for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for the
payment of moral damages in cases of quasi delict. On the theory that petitioners are liable
for breach of contract of carriage, the award of moral damages is authorized by Art. 1764,
in relation to Art. 2220, since Cabil's gross negligence amounted to bad faith. 12 Amyline
Antonio's testimony, as well as the testimonies of her father and copassengers, fully
establish the physical suffering and mental anguish she endured as a result of the injuries
caused by petitioners' negligence.

The award of exemplary damages and attorney's fees was also properly made. However,
for the same reason that it was error for the appellate court to increase the award of
compensatory damages, we hold that it was also error for it to increase the award of moral
damages and reduce the award of attorney's fees, inasmuch as private respondents, in
whose favor the awards were made, have not appealed. 13

As above stated, the decision of the Court of Appeals can be sustained either on the theory
of quasi delict or on that of breach of contract. The question is whether, as the two courts
below held, petitioners, who are the owners and driver of the bus, may be made to respond
jointly and severally to private respondent. We hold that they may be. In Dangwa
Trans. Co. Inc. v. Court of Appeals, 14 on facts similar to those in this case, this Court held
the bus company and the driver jointly and severally liable for damages for injuries
suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers
when a fellow passenger ran amuck, as a result of which the passengers jumped out of
the speeding bus and suffered injuries, was held also jointly and severally liable with the
bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of
the bus on which plaintiff was riding concurred with the negligence of a third party who
was the driver of another vehicle, thus causing an accident. In Anuran v. Buño, 16 Batangas
Laguna Tayabas Bus Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit
Corporation v. Court of Appeals, 18 the bus company, its driver, the operator of the other
vehicle and the driver of the vehicle were jointly and severally held liable to the injured
passenger or the latters' heirs. The basis of this allocation of liability was explained
in Viluan v. Court of Appeals, 19 thus:

Nor should it make any difference that the liability of petitioner [bus owner]
springs from contract while that of respondents [owner and driver of other
vehicle] arises from quasi-delict. As early as 1913, we already ruled
in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger
due to the negligence of the driver of the bus on which he was riding and of
the driver of another vehicle, the drivers as well as the owners of the two
vehicles are jointly and severally liable for damages. Some members of the
Court, though, are of the view that under the circumstances they are liable
on quasi-delict. 20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court
exonerated the jeepney driver from liability to the injured passengers and their families
while holding the owners of the jeepney jointly and severally liable, but that is because
that case was expressly tried and decided exclusively on the theory of culpa contractual.
As this Court there explained:

The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune
and Carreon (the jeepney owners) were negligent. However, its ruling that spouses
Mangune and Carreon are jointly and severally liable with Manalo is erroneous. The driver
cannot be held jointly and severally liable with carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is
between the carrier is exclusively responsible therefore to the passenger, even if such
breach be due to the negligence of his driver (see Viluan v. The Court of Appeals, et al.,
G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). 22

As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake
out their claim against the carrier and the driver exclusively on one theory, much less on
that of breach of contract alone. After all, it was permitted for them to allege alternative
causes of action and join as many parties as may be liable on such causes of action 23 so
long as private respondent and her coplaintiffs do not recover twice for the same injury.
What is clear from the cases is the intent of the plaintiff there to recover from both the
carrier and the driver, thus, justifying the holding that the carrier and the driver were jointly
and severally liable because their separate and distinct acts concurred to produce the
same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as

to award of damages. Petitioners are ORDERED to PAY jointly and severally the private
respondent Amyline Antonio the following amounts:

1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorney's fees; and

6) costs of suit.

SO ORDERED.

4.
G.R. No. 92288 February 9, 1993

BRITISH AIRWAYS, INC., petitioner,

vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING
AND GENERAL SERVICES, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.

Monina P. Lee for private respondent.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated
November 15, 1989 of the Court of Appeals1 affirming the decision of the trial court2 in
ordering petitioner British Airways, Inc. to pay private respondent First International
Trading and General Services actual damages, moral damages, corrective or exemplary
damages, attorney's fees and the costs as well as the Resolution dated February 15,
19903 denying petitioner's Motion for Reconsideration in the appealed decision.

It appears on record that on February 15, 1981, private respondent First International
Trading and General Services Co., a duly licensed domestic recruitment and placement
agency, received a telex message from its principal ROLACO Engineering and Contracting
Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said
principal.4

During the early part of March 1981, said principal paid to the Jeddah branch of petitioner
British Airways, Inc. airfare tickets for 93 contract workers with specific instruction to
transport said workers to Jeddah on or before March 30, 1981.

As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport
the 93 workers, private respondent was immediately informed by petitioner that its
principal had forwarded 93 prepaid tickets. Thereafter, private respondent instructed its
travel agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but the
latter failed to fly said workers, thereby compelling private respondent to borrow money in
the amount of P304,416.00 in order to purchase airline tickets from the other airlines as
evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it
had recruited who must leave immediately since the visas of said workers are valid only
for 45 days and the Bureau of Employment Services mandates that contract workers must
be sent to the job site within a period of 30 days.

Sometime in the first week of June, 1981, private respondent was again informed by the
petitioner that it had received a prepaid ticket advice from its Jeddah branch for the
transportation of 27 contract workers. Immediatety, private respondent instructed its travel
agent to book the 27 contract workers with the petitioner but the latter was only able to
book and confirm 16 seats on its June 9, 1981 flight. However, on the date of the scheduled
flight only 9 workers were able to board said flight while the remaining 7 workers were
rebooked to June 30, 1981 which bookings were again cancelled by the petitioner without
any prior notice to either private respondent or the workers. Thereafter, the 7 workers were
rebooked to the July 4,1981 flight of petitioner with 6 more workers booked for said flight.
Unfortunately, the confirmed bookings of the 13 workers were again cancelled and
rebooked to July 7, 1981.

On July 6, 1981, private respondent paid the travel tax of the said workers as required by
the petitioner but when the receipt of the tax payments was submitted, the latter informed
private respondent that it can only confirm the seats of the 12 workers on its July 7, 1981
flight. However, the confirmed seats of said workers were again cancelled without any
prior notice either to the private respondent or said workers. The 12 workers were finally
able to leave for Jeddah after private respondent had bought tickets from the other airlines.
As a result of these incidents, private respondent sent a letter to petitioner demanding
compensation for the damages it had incurred by the latter's repeated failure to transport
its contract workers despite confirmed bookings and payment of the corresponding travel
taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner
demanding the latter to pay the amount of P350,000.00 representing damages and
unrealized profit or income which was denied by the petitioner.

On August 8, 1981, private respondent received a telex message from its principal
cancelling the hiring of the remaining recruited workers due to the delay in transporting
the workers to Jeddah.5

On January 27, 1982, private respondent filed a complaint for damages against petitioner
with the Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a
telex message from Jeddah on March 20, 1981 advising that the principal of private
respondent had prepaid the airfares of 100 persons to transport private respondent's
contract workers from Manila to Jeddah on or before March 30, 1981. However, due to the
unavailability of space and limited time, petitioner had to return to its sponsor in Jeddah
the prepaid ticket advice consequently not even one of the alleged 93 contract workers
were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract
workers of private respondent to Jeddah but the travel agent of the private respondent
booked only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9
contract workers boarded the scheduled flight with 1 passenger not showing up as
evidenced by the Philippine Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-
A", "7-B" and "7-C").6

Thereafter, private respondent's travel agent booked seats for 5 contract workers on
petitioner's July 4, 1981 flight but said travel agent cancelled the booking of 2 passengers
while the other 3 passengers did not show up on said flight.

Sometime in July 1981, the travel agent of the private respondent booked 7 more contract
workers in addition to the previous 5 contract workers who were not able to board the July
4, 1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner
subject to reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to
petitioner's failure to get a reconfirmation from Saudi Arabia Airlines causing the
automatic cancellation of the bookings of private respondent's 12 contract workers. In the
morning of July 7, 1981, the computer system of the petitioner was reinstalled and
immediately petitioner tried to reinstate the bookings of the 12 workers with either Gulf Air
or Saudi Arabia Airlines but both airlines replied that no seat was available on that date
and had to place the 12 workers on the wait list. Said information was duly relayed to the
private respondent and the 12 workers before the scheduled flight.
After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive
portion of which reads as follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of
P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of

P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective

or exemplary damages;

4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as
attorney's fees; and

5. To pay the costs.7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after
the trial court denied its Motion for Reconsideration on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court,
the dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with costs

against the appellant.8

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it
there being no perfected contract of carriage existing between them as no ticket was ever
issued to private respondent's contract workers and, therefore, the obligation of the
petitioner to transport said contract workers did not arise. Furthermore, private
respondent's failure to attach any ticket in the complaint further proved that it was never
a party to the alleged transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of
action is an act or omission of one party in violation of the legal right or rights of the
other.9 Petitioner's repeated failures to transport private respondent's workers in its flight
despite confirmed booking of said workers clearly constitutes breach of contract and bad
faith on its part. In resolving petitioner's theory that private respondent has no cause of
action in the instant case, the appellate court correctly held that:
In dealing with the contract of common carriage of passengers for purpose
of accuracy, there are two (2) aspects of the same, namely: (a) the contract
"to carry (at some future time)," which contract is consensual and is
necessarily perfected by mere consent (See Article 1356, Civil Code of the
Philippines), and (b) the contract "of carriage" or "of common carriage" itself
which should be considered as a real contract for not until the carrier is
actually used can the carrier be said to have already assumed the obligation
of a carrier. (Paras, Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)

In the instant case, the contract "to carry" is the one involved which is
consensual and is perfected by the mere consent of the parties.

There is no dispute as to the appellee's consent to the said contract "to

carry" its contract workers from Manila to Jeddah. The appellant's consent
thereto, on the other hand, was manifested by its acceptance of the PTA or
prepaid ticket advice that ROLACO Engineering has prepaid the airfares of
the appellee's contract workers advising the appellant that it must transport
the contract workers on or before the end of March, 1981 and the other batch
in June, 1981.

Even if a PTA is merely an advice from the sponsors that an airline is

authorized to issue a ticket and thus no ticket was yet issued, the fact
remains that the passage had already been paid for by the principal of the
appellee, and the appellant had accepted such payment. The existence of
this payment was never objected to nor questioned by the appellant in the
lower court. Thus, the cause or consideration which is the fare paid for the
passengers exists in this case.

The third essential requisite of a contract is an object certain. In this contract

"to carry", such an object is the transport of the passengers from the place
of departure to the place of destination as stated in the telex.

Accordingly, there could be no more pretensions as to the existence of an

oral contract of carriage imposing reciprocal obligations on both parties.

In the case of appellee, it has fully complied with the obligation, namely, the
payment of the fare and its willingness for its contract workers to leave for
their place of destination.

On the other hand, the facts clearly show that appellant was remiss in its
obligation to transport the contract workers on their flight despite
confirmation and bookings made by appellee's travelling agent.

xxx xxx xxx

Besides, appellant knew very well that time was of the essence as the
prepaid ticket advice had specified the period of compliance therewith, and
with emphasis that it could only be used if the passengers fly on BA. Under
the circumstances, the appellant should have refused acceptance of the PTA
 from appellee's principal or to at least inform appellee that it could not
accommodate the contract workers.

xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment

for the airfares of the appellee's contract workers who were recruited for
ROLACO Engineering and the said contract workers were the intended
passengers in the aircraft of the appellant, the said contract "to carry" also
involved the appellee for as recruiter he had to see to it that the contract
workers should be transported to ROLACO Engineering in Jeddah thru the
appellant's transportation. For that matter, the involvement of the appellee
in the said contract "to carry" was well demonstrated when
the appellant upon receiving the PTA immediately advised the appellee
thereof. 10

Petitioner also contends that the appellate court erred in awarding actual damages in the
amount of P308,016.00 to private respondent since all expenses had already been
subsequently reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount
of P308,016.00 representing actual damages refers to private respondent's second cause
of action involving the expenses incurred by the latter which were not reimbursed by
ROLACO Engineering. However, in the Complaint 11 filed by private respondent, it was
alleged that private respondent suffered actual damages in the amount of P308,016.00
representing the money it borrowed from friends and financiers which is P304,416.00 for
the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear therefore
that the actual damages private respondent seeks to recover are the airline tickets and
travel taxes it spent for its workers which were already reimbursed by its principal and not
for any other expenses it had incurred in the process of recruiting said contract workers.
Inasmuch as all expenses including the processing fees incurred by private respondent
had already been paid for by the latter's principal on a staggered basis as admitted in open
court by its managing director, Mrs. Bienvenida Brusellas. 12 We do not find anymore
justification in the appellate court's decision in granting actual damages to private
respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the
airfare tickets of its contract workers when petitioner failed to transport said workers, the
reimbursements made by its principal to private respondent failed to support the latter's
claim that it suffered actual damages as a result of petitioner's failure to transport said
workers. It is undisputed that private respondent had consistently admitted that its
principal had reimbursed all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate

compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory
damages.
Furthermore, actual or compensatory damages cannot be presumed, but must be duly
proved, and proved with reasonable degree of certainty. A court cannot rely on
speculation, conjecture or guesswork as to the fact and amount of damages, but must
depend upon competent proof that they have suffered and on evidence of the actual
amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for
the injury suffered as a result of petitioner's failure to transport the former's workers
because of the latter's patent bad faith in the performance of its obligation. As correctly
pointed out by the appellate court:

As evidence had proved, there was complete failure on the part of the
appellant to transport the 93 contract workers of the appellee on or before
March 30, 1981 despite receipt of the payment for their airfares, and
acceptance of the same by the appellant, with specific instructions from the
appellee's principal to transport the contract workers on or before March 30,
1981. No previous notice was ever registered by the appellant that it could
not comply with the same. And then followed the detestable act of appellant
in unilaterally cancelling, booking and rebooking unreasonably the flight of
appellee's contract workers in June to July, 1981 without prior notice. And
all of these actuations of the appellant indeed constitute malice and evident
bad faith which had caused damage and besmirched the reputation and
business image of the appellee. 14

As to the alleged damages suffered by the petitioner as stated in its counterclaims, the
record shows that no claim for said damages was ever made by the petitioner immediately
after their alleged occurrence therefore said counterclaims were mere afterthoughts when
private respondent filed the present case.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the
award of actual damages be deleted from said decision.

SO ORDERED.
5.
G.R. No. L-18965 October 30, 1964

COMPAÑIA MARITIMA, petitioner,

vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.

Rafael Dinglasan for petitioner.

Ozaeta Gibbs & Ozaeta for respondent.

BAUTISTA ANGELO, J.:

Sometime in October, 1952, Macleod and Company of the Philippines contracted by

telephone the services of the Compañia Maritima, a shipping corporation, for the shipment
of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for
their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel
Navigator. This oral contract was later on confirmed by a formal and written booking
issued by Macleod's branch office in Sasa and handcarried to Compañia Maritima's branch
office in Davao in compliance with which the latter sent to Macleod's private wharf LCT
Nos. 1023 and 1025 on which the loading of the hemp was completed on October 29, 1952.
These two lighters were manned each by a patron and an assistant patron. The patrons of
both barges issued the corresponding carrier's receipts and that issued by the patron of
Barge No. 1025 reads in part:

Received in behalf of S.S. Bowline Knot in good order and condition from
MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at
Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at
the government's marginal wharf in the same place to await the arrival of the S.S. Bowline
Knot belonging to Compañia Maritima on which the hemp was to be loaded. During the
night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting
in the damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod
promptly notified the carrier's main office in Manila and its branch in Davao advising it of
its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for
cleaning, washing, reconditioning, and redrying. During the pe 1riod from
November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at
Sasa a total of 2,197.75 piculs of the reconditioned
dfhemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total
value of 116,835.00. After reclassification, the value of the reconditioned hemp was
reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum
of P8,863.30 representing Macleod's expenses in checking, grading, rebating, and other
fees for washing, cleaning and redrying in the amount of P19.610.00, the total loss adds
up to P60,421.02.

All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No.
1025, were insured with the Insurance Company of North America against all losses and
damages. In due time, Macleod filed a claim for the loss it suffered as above stated with
said insurance company, and after the same had been processed, the sum of P64,018.55
was paid, which was noted down in a document which aside from being a receipt of the
amount paid, was a subrogation agreement between Macleod and the insurance company
wherein the former assigned to the latter its rights over the insured and damaged cargo.
Having failed to recover from the carrier the sum of P60,421.02, which is the only amount
supported by receipts, the insurance company instituted the present action on October 28,
1953. After trial, the court a quo rendered judgment ordering the carrier to pay the
insurance company the sum of P60,421.02, with legal interest thereon from the date of the
filing of the complaint until fully paid, and the costs. This judgment was affirmed by the
Court of Appeals on December 14, 1960. Hence, this petition for review.

The issues posed before us are: (1) Was there a contract of carriage between the carrier
and the shipper even if the loss occurred when the hemp was loaded on a barge owned by
the carrier which was loaded free of charge and was not actually loaded on the S.S.
Bowline Knot which would carry the hemp to Manila and no bill of lading was issued
therefore?; (2) Was the damage caused to the cargo or the sinking of the barge where it
was loaded due to a fortuitous event, storm or natural disaster that would exempt the
carrier from liability?; (3) Can respondent insurance company sue the carrier under its
insurance contract as assignee of Macleod in spite of the fact that the liability of the carrier
as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in
regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and
sufficiency of the shipper's statement of accounts contrary to the burden of proof rule?;
and (5) Can the insurance company maintain this suit without proof of its personality to do
so?

1. This issue should be answered in the affirmative. As found by the Court of Appeals,
Macleod and Company contracted by telephone the services of petitioner to ship the hemp
in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by
a formal and written booking issued by the shipper's branch office, Davao City, in virtue of
which the carrier sent two of its lighters to undertake the service. It also appears that the
patrons of said lighters were employees of the carrier with due authority to undertake the
transportation and to sign the documents that may be necessary therefor so much so that
the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein
as follows: .

Received in behalf of S.S. Bowline Knot in good order and condition from
MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at
Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's
wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way
impair the contract of carriage already entered into between the carrier and the shipper,
for that preparatory step is but part and parcel of said contract of carriage. The lighters
were merely employed as the first step of the voyage, but once that step was taken and
the hemp delivered to the carrier's employees, the rights and obligations of the parties
attached thereby subjecting them to the principles and usages of the maritime law. In other
words, here we have a complete contract of carriage the consummation of which has
already begun: the shipper delivering the cargo to the carrier, and the latter taking
possession thereof by placing it on a lighter manned by its authorized employees, under
which Macleod became entitled to the privilege secured to him by law for its safe
transportation and delivery, and the carrier to the full payment of its freight upon
completion of the voyage.

The receipt of goods by the carrier has been said to lie at the foundation of the
contract to carry and deliver, and if actually no goods are received there can be no
such contract. The liability and responsibility of the carrier under a contract for the
carriage of goods commence on their actual delivery to, or receipt by, the carrier
or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment
on the vessel, where it is the custom to deliver in that way, is a good delivery and
binds the vessel receiving the freight, the liability commencing at the time of
delivery to the lighter. ... and, similarly, where there is a contract to carry goods
from one port to another, and they cannot be loaded directly on the vessel and
lighters are sent by the vessel to bring the goods to it, the lighters are for the time
its substitutes, so that the bill of landing is applicable to the goods as soon as they
are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied)

... The test as to whether the relation of shipper and carrier had been established is,
Had the control and possession of the cotton been completely surrendered by the
shipper to the railroad company? Whenever the control and possession of goods
passes to the carrier and nothing remains to be done by the shipper, then it can be
said with certainty that the relation of shipper and carrier has been established.
Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff &
Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St.
L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart &
Co., et al. v. Wade, et al., 200 S.W. 148).

The claim that there can be no contract of affreightment because the hemp was not actually
loaded on the ship that was to take it from Davao City to Manila is of no moment, for, as
already stated, the delivery of the hemp to the carrier's lighter is in line with the contract.
In fact, the receipt signed by the patron of the lighter that carried the hemp stated that he
was receiving the cargo "in behalf of S.S. Bowline Knot in good order and condition." On
the other hand, the authorities are to the effect that a bill of lading is not indispensable for
the creation of a contract of carriage.

Bill of lading not indispensable to contract of carriage. — As to the issuance of a

bill of lading, although article 350 of the Code of Commerce provides that "the
shipper as well as the carrier of merchandise or goods may mutua-lly demand that
a bill of lading is not indispensable. As regards the form of the contract of carriage
it can be said that provided that there is a meeting of the minds and from such
 meeting arise rights and obligations, there should be no limitations as to form." The
bill of lading is not essential to the contract, although it may become obligatory by
reason of the regulations of railroad companies, or as a condition imposed in the
contract by the agreement of the parties themselves. The bill of lading is juridically
a documentary proof of the stipulations and conditions agreed upon by both
parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the
Code does not demand, as necessary requisite in the contract of transportation, the
delivery of the bill of lading to the shipper, but gives right to both the carrier and
the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct.
Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised
Edition, pp. 12-13)

The liability of the carrier as common carrier begins with the actual delivery of the
goods for transportation, and not merely with the formal execution of a receipt or
bill of lading; the issuance of a bill of lading is not necessary to complete delivery
and acceptance. Even where it is provided by statute that liability commences with
the issuance of the bill of lading, actual delivery and acceptance are sufficient to
bind the carrier. (13 C.J.S., p. 288)

2. Petitioner disclaims responsibility for the damage of the cargo in question shielding
itself behind the claim of force majeure or storm which occurred on the night of October
29, 1952. But the evidence fails to bear this out.

Rather, it shows that the mishap that caused the damage or loss was due, not to force
majeure, but to lack of adequate precautions or measures taken by the carrier to prevent
the loss as may be inferred from the following findings of the Court of Appeals:

Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge
had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water
in the same manner as rain entered "thru tank man-holes", according to the patron
of LCT No. 1023 (exh. JJJ-4) — conclusively showing that the barge was not
seaworthy — it should be noted that on the night of the nautical accident there was
no storm, flood, or other natural disaster or calamity. Certainly, winds of 11 miles
per hour, although stronger than the average 4.6 miles per hour then prevailing in
Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For according to
Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour;
and by Philippine Weather Bureau standards winds should have a velocity of from
55 to 74 miles per hour in order to be classified as storm (Northern Assurance Co.,
Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12,
1959).

The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine
surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of
various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the
above-mentioned admission of two witnesses for appellant concerning the cracks of the
lighter's bottom and the entrance of the rain water 'thru manholes'." We are not prepared
to dispute this finding of the Court of Appeals.

3. There can also be no doubt that the insurance company can recover from the carrier as
assignee of the owner of the cargo for the insurance amount it paid to the latter under the
insurance contract. And this is so because since the cargo that was damaged was insured
with respondent company and the latter paid the amount represented by the loss, it is but
fair that it be given the right to recover from the party responsible for the loss. The instant
case, therefore, is not one between the insured and the insurer, but one between the
shipper and the carrier, because the insurance company merely stepped into the shoes of
the shipper. And since the shipper has a direct cause of action against the carrier on
account of the damage of the cargo, no valid reason is seen why such action cannot be
asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the
carrier set up as a defense any defect in the insurance policy not only because it is not a
privy to it but also because it cannot avoid its liability to the shipper under the contract of
carriage which binds it to pay any loss that may be caused to the cargo involved therein.
Thus, we find fitting the following comments of the Court of Appeals:

It was not imperative and necessary for the trial court to pass upon the question of
whether or not the disputed abaca cargo was covered by Marine Open Cargo Policy
No. MK-134 isued by appellee. Appellant was neither a party nor privy to this
insurance contract, and therefore cannot avail itself of any defect in the policy
which may constitute a valid reason for appellee, as the insurer, to reject the claim
of Macleod, as the insured. Anyway, whatever defect the policy contained, if any, is
deemed to have been waived by the subsequent payment of Macleod's claim by
appellee. Besides, appellant is herein sued in its capacity as a common carrier, and
appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as
above demonstrated, appellant is liable to Macleod and Company of the Philippines
for the los or damage to the 1,162 bales of hemp after these were received in good
order and condition by the patron of appellant's LCT No. 1025, it necessarily follows
that appellant is likewise liable to appellee who, as assignee of Macleod, merely
stepped into the shoes of and substi-tuted the latter in demanding from appellant
the payment for the loss and damage aforecited.

4. It should be recalled in connection with this issue that during the trial of this case the
carrier asked the lower court to order the production of the books of accounts of the Odell
Plantation containing the charges it made for the loss of the damaged hemp for verification
of its accountants, but later it desisted therefrom on the claim that it finds their production
no longer necessary. This desistance notwithstanding, the shipper however pre-sented
other documents to prove the damage it suffered in connection with the cargo and on the
strength thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after
the Court of Appeals affirmed this award upon the theory that the desistance of the carrier
from producing the books of accounts of Odell Plantation implies an admission of the
correctness of the statements of accounts contained therein, petitioner now contends that
the Court of Appeals erred in basing the affirmance of the award on such erroneous
interpretation.

There is reason to believe that the act of petitioner in waiving its right to have the books
of accounts of Odell Plantation presented in court is tantamount to an admission that the
statements contained therein are correct and their verification not necessary because its
main defense here, as well as below, was that it is not liable for the loss because there was
no contract of carriage between it and the shipper and the loss caused, if any, was due to
a fortuitous event. Hence, under the carrier's theory, the correctness of the account
representing the loss was not so material as would necessitate the presentation of the
books in question. At any rate, even if the books of accounts were not produced, the
correctness of the accounts cannot now be disputed for the same is supported by the
original documents on which the entries in said books were based which were presented
by the shipper as part of its evidence. And according to the Court of Appeals, these
documents alone sufficiently establish the award of P60,412.02 made in favor of
respondent.

5. Finally, with regard to the question concerning the personality of the insurance company
to maintain this action, we find the same of no importance, for the attorney himself of the
carrier admitted in open court that it is a foreign corporation doing business in the
Philippines with a personality to file the present action.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal,
Bengzon, J.P. and Zaldivar JJ., concur.

6.
G.R. No. 145804 February 6, 2003

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,

vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.

DECISION

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of
Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV
No. 60720, entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo
Roman, et. al.," which has modified the decision of 11 August 1998 of the Regional Trial
Court, Branch 266, Pasig City, exonerating Prudent Security Agency (Prudent) from
liability and finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for
damages on account of the death of Nicanor Navidad.
On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a "token" (representing
payment of the fare). While Navidad was standing on the platform near the LRT tracks,
Junelito Escartin, the security guard assigned to the area approached Navidad. A
misunderstanding or an altercation between the two apparently ensued that led to a fist
fight. No evidence, however, was adduced to indicate how the fight started or who,
between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At
the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman,
was coming in. Navidad was struck by the moving train, and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along
with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman,
the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death
of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim
against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it
had exercised due diligence in the selection and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of
presenting evidence, filed a demurrer contending that Navidad had failed to prove that
Escartin was negligent in his assigned task. On 11 August 1998, the trial court rendered
its decision; it adjudged:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants Prudent Security and Junelito Escartin ordering the latter to pay jointly and
severally the plaintiffs the following:

"a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

"b) Moral damages of P50,000.00;

"c) Attorney’s fees of P20,000;

"d) Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of
merit.

"The compulsory counterclaim of LRTA and Roman are likewise dismissed."1

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court
promulgated its now assailed decision exonerating Prudent from any liability for the death
of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable
thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants
from any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman
and the Light Rail Transit Authority (LRTA) are held liable for his death and are hereby
directed to pay jointly and severally to the plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorney’s fees."2

The appellate court ratiocinated that while the deceased might not have then as yet
boarded the train, a contract of carriage theretofore had already existed when the victim
entered the place where passengers were supposed to be after paying the fare and getting
the corresponding token therefor. In exempting Prudent from liability, the court stressed
that there was nothing to link the security agency to the death of Navidad. It said that
Navidad failed to show that Escartin inflicted fist blows upon the victim and the evidence
merely established the fact of death of Navidad by reason of his having been hit by the
train owned and managed by the LRTA and operated at the time by Roman. The appellate
court faulted petitioners for their failure to present expert evidence to establish the fact
that the application of emergency brakes could not have stopped the train.

The appellate court denied petitioners’ motion for reconsideration in its resolution of 10
October 2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court;
viz:

"I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE

FINDINGS OF FACTS BY THE TRIAL COURT

"II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.

"III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO

ROMAN IS AN EMPLOYEE OF LRTA."3

Petitioners would contend that the appellate court ignored the evidence and the factual
findings of the trial court by holding them liable on the basis of a sweeping conclusion
that the presumption of negligence on the part of a common carrier was not overcome.
Petitioners would insist that Escartin’s assault upon Navidad, which caused the latter to
fall on the tracks, was an act of a stranger that could not have been foreseen or prevented.
The LRTA would add that the appellate court’s conclusion on the existence of an employer-
employee relationship between Roman and LRTA lacked basis because Roman himself
had testified being an employee of Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of
carriage was deemed created from the moment Navidad paid the fare at the LRT station
and entered the premises of the latter, entitling Navidad to all the rights and protection
under a contractual relation, and that the appellate court had correctly held LRTA and
Roman liable for the death of Navidad in failing to exercise extraordinary diligence
imposed upon a common carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business
and for reasons of public policy, is burdened with the duty of exercising utmost diligence
in ensuring the safety of passengers.4 The Civil Code, governing the liability of a common
carrier for death of or injury to its passengers, provides:

"Article 1755. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, with
a due regard for all the circumstances.

"Article 1756. In case of death of or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755."

"Article 1759. Common carriers are liable for the death of or injuries to passengers through
the negligence or willful acts of the former’s employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the common
carriers.

"This liability of the common carriers does not cease upon proof that they exercised all
the diligence of a good father of a family in the selection and supervision of their
employees."

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on

account of the willful acts or negligence of other passengers or of strangers, if the common
carrier’s employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission."

The law requires common carriers to carry passengers safely using the utmost diligence
of very cautious persons with due regard for all circumstances.5 Such duty of a common
carrier to provide safety to its passengers so obligates it not only during the course of the
trip but for so long as the passengers are within its premises and where they ought to be
in pursuance to the contract of carriage.6 The statutory provisions render a common carrier
liable for death of or injury to passengers (a) through the negligence or wilful acts of its
employees or b) on account of wilful acts or negligence of other passengers or of strangers
if the common carrier’s employees through the exercise of due diligence could have
prevented or stopped the act or omission.7 In case of such death or injury, a carrier is
presumed to have been at fault or been negligent, and8 by simple proof of injury, the
passenger is relieved of the duty to still establish the fault or negligence of the carrier or
of its employees and the burden shifts upon the carrier to prove that the injury is due to
an unforeseen event or to force majeure.9 In the absence of satisfactory explanation by the
carrier on how the accident occurred, which petitioners, according to the appellate court,
have failed to show, the presumption would be that it has been at fault,10 an exception from
the general rule that negligence must be proved.11

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify
the victim arises from the breach of that contract by reason of its failure to exercise the
high diligence required of the common carrier. In the discharge of its commitment to
ensure the safety of passengers, a carrier may choose to hire its own employees or avail
itself of the services of an outsider or an independent firm to undertake the task. In either
case, the common carrier is not relieved of its responsibilities under the contract of
carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under
the provisions of Article 217612 and related provisions, in conjunction with Article 2180,13 of
the Civil Code. The premise, however, for the employer’s liability is negligence or fault on
the part of the employee. Once such fault is established, the employer can then be made
liable on the basis of the presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and supervision of its employees. The liability
is primary and can only be negated by showing due diligence in the selection and
supervision of the employee, a factual matter that has not been shown. Absent such a
showing, one might ask further, how then must the liability of the common carrier, on the
one hand, and an independent contractor, on the other hand, be described? It would be
solidary. A contractual obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 219414 of the Civil Code can well apply.15 In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. 16 Stated differently,
when an act which constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, thereby allowing the rules on tort to
apply.17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor
Navidad, this Court is concluded by the factual finding of the Court of Appeals that "there
is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not been duly proven x x x." This finding of the
appellate court is not without substantial justification in our own review of the records of
the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any
culpable act or omission, he must also be absolved from liability. Needless to say, the
contractual tie between the LRT and Navidad is not itself a juridical relation between the
latter and Roman; thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal

damages are adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.18 It is an established rule that
nominal damages cannot co-exist with compensatory damages.19

WHEREFORE, the assailed decision of the appellate court is AFFIRMED with

MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b)
petitioner Rodolfo Roman is absolved from liability. No costs.

SO ORDERED.( si LRT lang gang liable for the accident)

7.
G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would
bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for
hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles
with cargo which various merchants wanted delivered to differing establishments in Pangasinan.
For that service, respondent charged freight rates which were commonly lower than regular
commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized
dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted
with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of
General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4
December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the other truck which was driven by
Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere
along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the
truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court
of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of
the lost merchandise, plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise the extraordinary
diligence required of him by the law, should be held liable for the value of the undelivered
goods.

In his Answer, private respondent denied that he was a common carrier and argued that
he could not be held responsible for the value of the lost goods, such loss having been
due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to
be a common carrier and holding him liable for the value of the undelivered goods (P
22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in
considering him a common carrier; in finding that he had habitually offered trucking
services to the public; in not exempting him from liability on the ground of force
majeure; and in ordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent
had been engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier.
Petitioner came to this Court by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo.
(Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may,
under the facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or

associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.

The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population.
We think that Article 1733 deliberately omit making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:

... every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock,
ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations
and other similar public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common

carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such back-hauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal occupation
was not the carriage of goods for others. There is no dispute that private respondent
charged his customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of
public convenience, and concluded he was not a common carrier. This is palpable error.
A certificate of public convenience is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That liability arises the moment a
person or firm acts as a common carrier, without regard to whether or not such carrier has
also complied with the requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience or other franchise.
To exempt private respondent from the liabilities of a common carrier because he has not
secured the necessary certificate of public convenience, would be offensive to sound
public policy; that would be to reward private respondent precisely for failing to comply
with applicable statutory requirements. The business of a common carrier impinges
directly and intimately upon the safety and well being and property of those members of
the general community who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of those who utilize their
services and the law cannot allow a common carrier to render such duties and liabilities
merely facultative by simply failing to obtain the necessary permits and authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are
held to a very high degree of care and diligence ("extraordinary diligence") in the carriage
of goods as well as of passengers. The specific import of extraordinary diligence in the
care of goods transported by a common carrier is, according to Article 1733, "further
expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any
of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster

or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in
the containers; and
(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration
which exempt the common carrier for responsibility therefor, is a closed list. Causes falling
outside the foregoing list, even if they appear to constitute a species of force majeure fall
within the scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the

preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as required in
Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause
alleged in the instant case — the hijacking of the carrier's truck — does not fall within any
of the five (5) categories of exempting causes listed in Article 1734. It would follow,
therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions
of Article 1735, in other words, that the private respondent as common carrier is presumed
to have been at fault or to have acted negligently. This presumption, however, may be
overthrown by proof of extraordinary diligence on the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the
care of petitioner's goods. Petitioner argues that in the circumstances of this case, private
respondent should have hired a security guard presumably to ride with the truck carrying
the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case,
the standard of extraordinary diligence required private respondent to retain a security
guard to ride with the truck and to engage brigands in a firelight at the risk of his own life
and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of
hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under
Article 1733, given additional specification not only by Articles 1734 and 1735 but also by
Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered

unreasonable, unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the
acts or omissions of his or its employees;

(6) that the common carrier's liability for acts committed by

thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and

(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the
defective condition of the car vehicle, ship, airplane or other
equipment used in the contract of carriage. (Emphasis
supplied)

Under Article 1745 (6) above, a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat,
violence or force."

In the instant case, armed men held up the second truck owned by private respondent
which carried petitioner's cargo. The record shows that an information for robbery in band
was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled
"People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar
Oria and one John Doe." There, the accused were charged with willfully and unlawfully
taking and carrying away with them the second truck, driven by Manuel Estrada and loaded
with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in
Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with
grave, if not irresistible, threat, violence or force.3 Three (3) of the five (5) hold-uppers were
armed with firearms. The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days and later releasing
them in another province (in Zambales). The hijacked truck was subsequently found by
the police in Quezon City. The Court of First Instance convicted all the accused of robbery,
though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be
regarded as quite beyond the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers are not made absolute
insurers against all risks of travel and of transport of goods, and are not held liable for
acts or events which cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise which was
lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision
of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

8.
G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas,
respondents.

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial
Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended,
to contract, install and operate oil pipelines. The original pipeline concession was granted
in 19671 and renewed by the Energy Regulatory Board in 1992. 2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the
respondent City Treasurer required petitioner to pay a local tax based on its gross receipts
for the fiscal year 1993 pursuant to the Local Government Code3. The respondent City
Treasurer assessed a business tax on the petitioner amounting to P956,076.04 payable in
four installments based on the gross receipts for products pumped at GPS-1 for the fiscal
year 1993 which amounted to P181,681,151.00. In order not to hamper its operations,
petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of
1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:

Please note that our Company (FPIC) is a pipeline operator with a

government concession granted under the Petroleum Act. It is engaged in
the business of transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our
Company is exempt from paying tax on gross receipts under Section 133 of
the Local Government Code of 1991 . . . .

Moreover, Transportation contractors are not included in the enumeration of

contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax "on contractors and other
independent contractors" under Section 143, Paragraph (e) of the Local
Government Code does not include the power to levy on transportation
contractors.

The imposition and assessment cannot be categorized as a mere fee

authorized under Section 147 of the Local Government Code. The said
 section limits the imposition of fees and charges on business to such
amounts as may be commensurate to the cost of regulation, inspection, and
licensing. Hence, assuming arguendo that FPIC is liable for the license fee,
the imposition thereof based on gross receipts is violative of the aforecited
provision. The amount of P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection and licensing. The fee is
already a revenue raising measure, and not a mere regulatory imposition.4

On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code.5

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint6 for tax refund with prayer for writ of preliminary injunction against respondents
City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on
its gross receipts violates Section 133 of the Local Government Code; (2) the authority of
cities to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes
on transportation contractors for, as defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax paid. 7

Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local Government Code as said exemption applies only
to "transportation contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that pipelines are not
included in the term "common carrier" which refers solely to ordinary carriers such as
trucks, trains, ships and the like. Respondents further posit that the term "common carrier"
under the said code pertains to the mode or manner by which a product is delivered to its
destination.8

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in
this wise:

. . . Plaintiff is either a contractor or other independent contractor.

. . . the exemption to tax claimed by the plaintiff has become unclear. It is a

rule that tax exemptions are to be strictly construed against the taxpayer,
taxes being the lifeblood of the government. Exemption may therefore be
granted only by clear and unequivocal provisions of law.

Plaintiff claims that it is a grantee of a pipeline concession under Republic

Act 387. (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of
concession grant any tax exemption upon the plaintiff.

Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this
case (exemption being unclear and equivocal
 ) resort to distinctions or other considerations may be of help:

1. That the exemption granted under Sec. 133 (j)

encompasses only common carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and
facilities to a single specific or "special
customer" under a "special contract."

2. The Local Tax Code of 1992 was basically

enacted to give more and effective local
autonomy to local governments than the
previous enactments, to make them
economically and financially viable to serve the
people and discharge their functions with a
concomitant obligation to accept certain
devolution of powers, . . . So, consistent with this
policy even franchise grantees are taxed (Sec.
137) and contractors are also taxed under Sec.
143 (e) and 151 of the Code.9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On
February 27, 1995, we referred the case to the respondent Court of Appeals for
consideration and adjudication. 10 On November 29, 1995, the respondent court rendered a
decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion
for reconsideration was denied on July 18, 1996. 12

Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996. 13Petitioner moved for a reconsideration which was granted by this
Court in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) the
petitioner is not a common carrier or a transportation contractor, and (2) the exemption
sought for by petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public
as engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.

Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm
or association engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of

carrying goods for others as a public
 employment, and must hold himself out as ready
to engage in the transportation of goods for
person generally as a business and not as a
casual occupation;

2. He must undertake to carry goods of the kind

to which his business is confined;

3. He must undertake to carry by the method by

which his business is conducted and over his
established roads; and

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the
goods by land and for compensation. The fact that petitioner has a limited clientele does
not exclude it from the definition of a common carrier. In De Guzman vs. Court of
Appeals 16we ruled that:

The above article (Art. 1732, Civil Code) makes no distinction

between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a "sideline").
Article 1732 . . . avoids making any distinction between a
person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services
to the "general public," i.e., the general community or
population, and one who offers services or solicits business
only from a narrow segment of the general population. We
think that Article 1877 deliberately refrained from making such
distinctions.

So understood, the concept of "common carrier" under Article

1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service"
includes:

every person that now or hereafter may own,

operate. manage, or control in the Philippines,
for hire or compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business
 purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any
class, express service, steamboat, or steamship
line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or
dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and
power, water supply andpower
petroleum, sewerage system, wire or wireless
communications systems, wire or wireless
broadcasting stations and other similar public
services. (Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of
the Local Government Code refers only to common carriers transporting goods and
passengers through moving vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air.
It does not provide that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are considered common
carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:

Art. 86. Pipe line concessionaire as common carrier. — A pipe

line shall have the preferential right to utilize installations for
the transportation of petroleum owned by him, but is obligated
to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by
others for transport, and to charge without discrimination such
rates as may have been approved by the Secretary of
Agriculture and Natural Resources.

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of
Article 7 thereof provides:

that everything relating to the exploration for and exploitation

of petroleum . . . and everything relating to the manufacture,
refining, storage, or transportation by special methods of
petroleum, is hereby declared to be a public utility. (Emphasis
Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In
BIR Ruling No. 069-83, it declared:
 . . . since [petitioner] is a pipeline concessionaire that is
engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 . . . .
Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier"
and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:

Sec. 133. Common Limitations on the Taxing Powers of Local

Government Units. — Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following:

xxx xxx xxx

(j) Taxes on the gross receipts of

transportation contractors and
persons engaged in the
transportation of passengers or
freight by hire and common
carriers by air, land or water,
except as provided in this Code.

The deliberations conducted in the House of Representatives on the Local Government

Code of 1991 are illuminating:

MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line

1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on

the Taxing Powers of Local Government Units." . . .

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of

transportation. This appears to be one of those being deemed
to be exempted from the taxing powers of the local
government units. May we know the reason why the
transportation business is being excluded from the taxing
powers of the local government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained

in Section 121 (now Sec. 131), line 16, paragraph 5. It states
that local government units may not impose taxes on the
business of transportation, except as otherwise provided in
this code.
 Now, Mr. Speaker, if the Gentleman would care to go to page
98 of Book II, one can see there that provinces have the power
to impose a tax on business enjoying a franchise at the rate of
not more than one-half of 1 percent of the gross annual
receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the
exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the

imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top of
what is already being imposed by the National Internal
Revenue Code which is the so-called "common carriers tax."
We do not want a duplication of this tax, so we just provided
for an exception under Section 125 [now Sec. 137] that a
province may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker.
. . . 18

It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. 19 To tax petitioner again on its
gross receipts in its transportation of petroleum business would defeat the purpose of the
Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.

SO ORDERED.
9.
G.R. No. 157917 August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and
the COURT OF APPEALS Respondents.

DECISION

BERSAMIN, J.:

The operator of a. school bus service is a common carrier in the eyes of the law. He is
bound to observe extraordinary diligence in the conduct of his business. He is presumed
to be negligent when death occurs to a passenger. His liability may include indemnity for
loss of earning capacity even if the deceased passenger may only be an unemployed high
school student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal
the adverse decision promulgated on November 13, 2002, by which the Court of Appeals
(CA) affirmed with modification the decision rendered on December 3, 1999 by the
Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed them jointly
and severally liable with Philippine National Railways (PNR), their co-defendant, to
Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron
John L. Zarate (Aaron), then a high school student of Don Bosco Technical Institute (Don
Bosco).

Antecedents

The Pereñas were engaged in the business of transporting students from their respective
residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the
capacity to transport 14 students at a time, two of whom would be seated in the front
beside the driver, and the others in the rear, with six students on either side. They
employed Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don
Bosco. On August 22, 1996, as on previous school days, the van picked Aaron up around
6:00 a.m. from the Zarates’ residence. Aaron took his place on the left side of the van near
the rear door. The van, with its air-conditioning unit turned on and the stereo playing
loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering
that the students were due at Don Bosco by 7:15 a.m., and that they were already running
late because of the heavy vehicular traffic on the South Superhighway, Alfaro took the van
to an alternate route at about 6:45 a.m. by traversing the narrow path underneath the
Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short
cut into Makati. At the time, the narrow path was marked by piles of construction materials
and parked passenger jeepneys, and the railroad crossing in the narrow path had no
railroad warning signs, or watchmen, or other responsible persons manning the crossing.
In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302
(train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange
travelling northbound. As the train neared the railroad crossing, Alfaro drove the van
eastward across the railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on its left side. The
train blew its horn to warn motorists of its approach. When the train was about 50 meters
away from the passenger bus and the van, Alano applied the ordinary brakes of the train.
He applied the emergency brakes only when he saw that a collision was imminent. The
passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did
not. The train hit the rear end of the van, and the impact threw nine of the 12 students in
the rear, including Aaron, out of the van. Aaron landed in the path of the train, which
dragged his body and severed his head, instantaneously killing him. Alano fled the scene
on board the train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this
action for damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR
filed their respective answers, with cross-claims against each other, but Alfaro could not
be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and
safe transportation carriage of the former spouses' son from their residence in
Parañaque to his school at the Don Bosco Technical Institute in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation
thereof, Aaron, the minor son of spouses Zarate died in connection with a
vehicular/train collision which occurred while Aaron was riding the contracted
carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided with the train of
 PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes
Interchange in Makati City, Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train
collision was a railroad crossing used by motorists for crossing the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no appropriate
and safety warning signs and railings at the site commonly used for railroad
crossing;

(6) At the material time, countless number of Makati bound public utility and private
vehicles used on a daily basis the site of the collision as an alternative route and
short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the commuter
train involved without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact
intended by the railroad operator for railroad crossing at the time of the vehicular
collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and

(12) The site of the vehicular/train collision was within the vicinity or less than 100
meters from the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his
functions, liable for negligence constituting the proximate cause of the vehicular
collision, which resulted in the death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Pereña being the employer of defendant
Alfaro are liable for any negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the
railroad system is liable for negligence in failing to provide adequate safety warning
signs and railings in the area commonly used by motorists for railroad crossings,
constituting the proximate cause of the vehicular collision which resulted in the
death of the plaintiff spouses' son;

(4) Whether or not defendant spouses Pereña are liable for breach of the contract
of carriage with plaintiff-spouses in failing to provide adequate and safe
transportation for the latter's son;
 (5) Whether or not defendants spouses are liable for actual, moral damages,
exemplary damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the
diligence of employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death of
Aaron John Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter
train involved in the accident, in allowing or tolerating the motoring public to cross,
and its failure to install safety devices or equipment at the site of the accident for
the protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses
for any and whatever amount the latter may be held answerable or which they may
be ordered to pay in favor of plaintiffs by reason of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the
amounts claimed by the latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral
and exemplary damages and attorney's fees.2

The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the
safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176,
Civil Code.

In their defense, the Pereñas adduced evidence to show that they had exercised the
diligence of a good father of the family in the selection and supervision of Alfaro, by
making sure that Alfaro had been issued a driver’s license and had not been involved in
any vehicular accident prior to the collision; that their own son had taken the van daily;
and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips
transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the
reckless crossing of the van whose driver had not first stopped, looked and listened; and
that the narrow path traversed by the van had not been intended to be a railroad crossing
for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff

and against the defendants ordering them to jointly and severally pay the plaintiffs as
follows:

(1) (for) the death of Aaron- Php50,000.00;

 (2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorney’s fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4 reiterating that
the cooperative gross negligence of the Pereñas and PNR had caused the collision that
led to the death of Aaron; and that the damages awarded to the Zarates were not excessive,
but based on the established circumstances.

The CA’s Ruling

Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and

severally liable together with defendant-appellants spouses Teodorico and Nanette
Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the
death of Aaron Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees

witnesses despite overwhelming documentary evidence on record, supporting the
case of defendants-appellants Philippine National Railways.

The Pereñas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual,
moral and exemplary damages and attorney’s fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereñas against the
Philippine National Railways and in not holding the latter and its train driver primarily
responsible for the incident.

The trial court erred in awarding excessive damages and attorney’s fees.

The trial court erred in awarding damages in the form of deceased’s loss of earning
capacity in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC,
but limited the moral damages to ₱ 2,500,000.00; and deleted the attorney’s fees because
the RTC did not state the factual and legal bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court,
Branch 260 of Parañaque City is AFFIRMED with the modification that the award of Actual
Damages is reduced to ₱ 59,502.76; Moral Damages is reduced to ₱ 2,500,000.00; and the
award for Attorney’s Fees is Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of
the ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad
Company,7 wherein the Court gave the heirs of Cariaga a sum representing the loss of the
deceased’s earning capacity despite Cariaga being only a medical student at the time of
the fatal incident. Applying the formula adopted in the American Expectancy Table of
Mortality:–

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life
expectancy from age of 21 (the age when he would have graduated from college and
started working for his own livelihood) instead of 15 years (his age when he died).
Considering that the nature of his work and his salary at the time of Aaron’s death were
unknown, it used the prevailing minimum wage of ₱ 280.00/day to compute Aaron’s gross
annual salary to be ₱ 110,716.65, inclusive of the thirteenth month pay. Multiplying this
annual salary by Aaron’s life expectancy of 39.3 years, his gross income would aggregate
to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱ 2,189,664.30 was
deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net
income turning out to be higher than the amount claimed by the Zarates, only ₱
2,109,071.00, the amount expressly prayed for by them, was granted.

On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8

Issues

In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial court’s decision holding the petitioners
jointly and severally liable to pay damages with Philippine National Railways and
dismissing their cross-claim against the latter.

II. The lower court erred in affirming the trial court’s decision awarding damages for loss
of earning capacity of a minor who was only a high school student at the time of his death
in the absence of sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded,
assuming petitioners are liable at all.
Ruling

The petition has no merit.

1.
Were the Pereñas and PNR jointly
and severally liable for damages? YES

The Zarates brought this action for recovery of damages against both the Pereñas and the
PNR, basing their claim against the Pereñas on breach of contract of carriage and against
the PNR on quasi-delict.

The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereñas’ defense was that they exercised the diligence of a good father
of the family in the selection and supervision of Alfaro, the van driver, by seeing to it that
Alfaro had a driver’s license and that he had not been involved in any vehicular accident
prior to the fatal collision with the train; that they even had their own son travel to and from
school on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro
in transporting the passengers to and from school. The RTC gave scant consideration to
such defense by regarding such defense as inappropriate in an action for breach of
contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the
Pereñas operated as a common carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually
regarded as a private carrier,9primarily because he only caters to some specific or
privileged individuals, and his operation is neither open to the indefinite public nor for
public use, the exact nature of the operation of a school bus service has not been finally
settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or

persons from one place to another, gratuitously or for hire. The carrier is classified either
as a private/special carrier or as a common/public carrier.10 A private carrier is one who,
without making the activity a vocation, or without holding himself or itself out to the public
as ready to act for all who may desire his or its services, undertakes, by special agreement
in a particular instance only, to transport goods or persons from one place to another
either gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code
govern the contract of private carriage.The diligence required of a private carrier is only
ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier
is a person, corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation,
offering such services to the public.12 Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act,13 and other special
laws relating to transportation. A common carrier is required to observe extraordinary
diligence, and is presumed to be at fault or to have acted negligently in case of the loss of
the effects of passengers, or the death or injuries to passengers.14

In relation to common carriers, the Court defined public use in the following terms in
United States v. Tan Piaco,15viz:

"Public use" is the same as "use by the public". The essential feature of the public use is
not confined to privileged individuals, but is open to the indefinite public. It is this
indefinite or unrestricted quality that gives it its public character. In determining whether
a use is public, we must look not only to the character of the business to be done, but also
to the proposed mode of doing it. If the use is merely optional with the owners, or the
public benefit is merely incidental, it is not a public use, authorizing the exercise of the
jurisdiction of the public utility commission. There must be, in general, a right which the
law compels the owner to give to the general public. It is not enough that the general
prosperity of the public is promoted. Public use is not synonymous with public interest.
The true criterion by which to judge the character of the use is whether the public may
enjoy it by right or only by permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code
avoided any distinction between a person or an enterprise offering transportation on a
regular or an isolated basis; and has not distinguished a carrier offering his services to
the general public, that is, the general community or population, from one offering his
services only to a narrow segment of the general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil Code. Public service,
according to Section 13, paragraph (b) of the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientèle, whether permanent
or occasional, and done for the general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight or passenger, or
both, with or without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or freight or both, shipyard,
marine repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public
services. x x x.17

Given the breadth of the aforequoted characterization of a common carrier, the Court has
considered as common carriers pipeline operators,18 custom brokers and
warehousemen,19 and barge operators20 even if they had limited clientèle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent
of the business actually transacted, or the number and character of the conveyances used
in the activity, but whether the undertaking is a part of the activity engaged in by the carrier
that he has held out to the general public as his business or occupation. If the undertaking
is a single transaction, not a part of the general business or occupation engaged in, as
advertised and held out to the general public, the individual or the entity rendering such
service is a private, not a common, carrier. The question must be determined by the
character of the business actually carried on by the carrier, not by any secret intention or
mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.21

Applying these considerations to the case before us, there is no question that the Pereñas
as the operators of a school bus service were: (a) engaged in transporting passengers
generally as a business, not just as a casual occupation; (b) undertaking to carry
passengers over established roads by the method by which the business was conducted;
and (c) transporting students for a fee. Despite catering to a limited clientèle, the Pereñas
operated as a common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where they
operated the service and for a fee.

The common carrier’s standard of care and vigilance as to the safety of the passengers is
defined by law. Given the nature of the business and for reasons of public policy, the
common carrier is bound "to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case."22 Article 1755 of the Civil Code specifies that the common
carrier should "carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances." To successfully fend off liability in an action upon the death or injury to a
passenger, the common carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at fault or acted negligently
would stand.23 No device, whether by stipulation, posting of notices, statements on tickets,
or otherwise, may dispense with or lessen the responsibility of the common carrier as
defined under Article 1755 of the Civil Code. 24

And, secondly, the Pereñas have not presented any compelling defense or reason by
which the Court might now reverse the CA’s findings on their liability. On the contrary, an
examination of the records shows that the evidence fully supported the findings of the CA.

As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their passenger.25 The
presumption of negligence, being a presumption of law, laid the burden of evidence on
their shoulders to establish that they had not been negligent.26 It was the law no less that
required them to prove their observance of extraordinary diligence in seeing to the safe
and secure carriage of the passengers to their destination. Until they did so in a credible
manner, they stood to be held legally responsible for the death of Aaron and thus to be
held liable for all the natural consequences of such death.

There is no question that the Pereñas did not overturn the presumption of their negligence
by credible evidence. Their defense of having observed the diligence of a good father of a
family in the selection and supervision of their driver was not legally sufficient. According
to Article 1759 of the Civil Code, their liability as a common carrier did not cease upon
proof that they exercised all the diligence of a good father of a family in the selection and
supervision of their employee. This was the reason why the RTC treated this defense of
the Pereñas as inappropriate in this action for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have
acted beyond the scope of his authority or even in violation of the orders of the common
carrier.27 In this connection, the records showed their driver’s actual negligence. There was
a showing, to begin with, that their driver traversed the railroad tracks at a point at which
the PNR did not permit motorists going into the Makati area to cross the railroad tracks.
Although that point had been used by motorists as a shortcut into the Makati area, that
fact alone did not excuse their driver into taking that route. On the other hand, with his
familiarity with that shortcut, their driver was fully aware of the risks to his passengers but
he still disregarded the risks. Compounding his lack of care was that loud music was
playing inside the air-conditioned van at the time of the accident. The loudness most
probably reduced his ability to hear the warning horns of the oncoming train to allow him
to correctly appreciate the lurking dangers on the railroad tracks. Also, he sought to
overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In
so doing, he lost his view of the train that was then coming from the opposite side of the
passenger bus, leading him to miscalculate his chances of beating the bus in their race,
and of getting clear of the train. As a result, the bus avoided a collision with the train but
the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to
a full stop before traversing the railroad tracks despite knowing that his slackening of
speed and going to a full stop were in observance of the right of way at railroad tracks as
defined by the traffic laws and regulations.28He thereby violated a specific traffic regulation
on right of way, by virtue of which he was immediately presumed to be negligent. 29

The omissions of care on the part of the van driver constituted negligence, 30 which,
according to Layugan v. Intermediate Appellate Court,31 is "the omission to do something
which a reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do,32 or as Judge Cooley defines it, ‘(t)he failure to observe for
the protection of the interests of another person, that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such other person suffers
injury.’"33

The test by which to determine the existence of negligence in a particular case has been
aptly stated in the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be
stated as follows: Did the defendant in doing the alleged negligent act use that reasonable
care and caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence. The law here in effect adopts the standard
supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law. The existence of negligence in a given case is not determined by reference to
the personal judgment of the actor in the situation before him. The law considers what
would be reckless, blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human experience and in view of the
facts involved in the particular case. Abstract speculation cannot here be of much value
but this much can be profitably said: Reasonable men govern their conduct by the
circumstances which are before them or known to them. They are not, and are not
supposed to be, omniscient of the future. Hence they can be expected to take care only
when there is something before them to suggest or warn of danger. Could a prudent man,
in the case under consideration, foresee harm as a result of the course actually pursued?
If so, it was the duty of the actor to take precautions to guard against that harm.
Reasonable foresight of harm, followed by the ignoring of the suggestion born of this
prevision, is always necessary before negligence can be held to exist. Stated in these
terms, the proper criterion for determining the existence of negligence in a given case is
this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor
would have foreseen that an effect harmful to another was sufficiently probable to warrant
his foregoing the conduct or guarding against its consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely
negligent when he traversed the railroad tracks at a point not allowed for a motorist’s
crossing despite being fully aware of the grave harm to be thereby caused to his
passengers; and when he disregarded the foresight of harm to his passengers by
overtaking the bus on the left side as to leave himself blind to the approach of the
oncoming train that he knew was on the opposite side of the bus.

Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate

Court,35 where the Court held the PNR solely liable for the damages caused to a passenger
bus and its passengers when its train hit the rear end of the bus that was then traversing
the railroad crossing. But the circumstances of that case and this one share no similarities.
In Philippine National Railways v. Intermediate Appellate Court, no evidence of
contributory negligence was adduced against the owner of the bus. Instead, it was the
owner of the bus who proved the exercise of extraordinary diligence by preponderant
evidence. Also, the records are replete with the showing of negligence on the part of both
the Pereñas and the PNR. Another distinction is that the passenger bus in Philippine
National Railways v. Intermediate Appellate Court was traversing the dedicated railroad
crossing when it was hit by the train, but the Pereñas’ school van traversed the railroad
tracks at a point not intended for that purpose.

At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and
severally" liable for damages arising from the death of Aaron. They had been impleaded in
the same complaint as defendants against whom the Zarates had the right to relief, whether
jointly, severally, or in the alternative, in respect to or arising out of the accident, and
questions of fact and of law were common as to the Zarates.36 Although the basis of the
right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereñas was
distinct from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict under
Article 2176, Civil Code), they nonetheless could be held jointly and severally liable by
virtue of their respective negligence combining to cause the death of Aaron. As to the PNR,
the RTC rightly found the PNR also guilty of negligence despite the school van of the
Pereñas traversing the railroad tracks at a point not dedicated by the PNR as a railroad
crossing for pedestrians and motorists, because the PNR did not ensure the safety of
others through the placing of crossbars, signal lights, warning signs, and other permanent
safety barriers to prevent vehicles or pedestrians from crossing there. The RTC observed
that the fact that a crossing guard had been assigned to man that point from 7 a.m. to 5
p.m. was a good indicium that the PNR was aware of the risks to others as well as the need
to control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint
tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?

The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with
the RTC on the liability, the CA modified the amount. Both lower courts took into
consideration that Aaron, while only a high school student, had been enrolled in one of
the reputable schools in the Philippines and that he had been a normal and able-bodied
child prior to his death. The basis for the computation of Aaron’s earning capacity was not
what he would have become or what he would have wanted to be if not for his untimely
death, but the minimum wage in effect at the time of his death. Moreover, the RTC’s
computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at
the time of his death, but on 21 years, his age when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable and
fully warranted.

Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative
and unfounded. They cited People v. Teehankee, Jr.,37 where the Court deleted the
1âwphi1

indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative
due to his having graduated from high school at the International School in Manila only
two years before the shooting, and was at the time of the shooting only enrolled in the first
semester at the Manila Aero Club to pursue his ambition to become a professional pilot.
That meant, according to the Court, that he was for all intents and purposes only a high
school graduate.

We reject the Pereñas’ submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of
Jussi Leino was not akin to that of Aaron here. The CA and the RTC were not speculating
that Aaron would be some highly-paid professional, like a pilot (or, for that matter, an
engineer, a physician, or a lawyer). Instead, the computation of Aaron’s earning capacity
was premised on him being a lowly minimum wage earner despite his being then enrolled
at a prestigious high school like Don Bosco in Makati, a fact that would have likely ensured
his success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be
taken against his parents and in favor of the defendants whose negligence not only cost
Aaron his life and his right to work and earn money, but also deprived his parents of their
right to his presence and his services as well. Our law itself states that the loss of the
earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs
of the deceased, and shall in every case be assessed and awarded by the court "unless
the deceased on account of permanent physical disability not caused by the defendant,
had no earning capacity at the time of his death."38 Accordingly, we emphatically hold in
favor of the indemnification for Aaron’s loss of earning capacity despite him having been
unemployed, because compensation of this nature is awarded not for loss of time or
earnings but for loss of the deceased’s power or ability to earn money. 39

This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,40 fourth-year medical student
Edgardo Carriaga’s earning capacity, although he survived the accident but his injuries
rendered him permanently incapacitated, was computed to be that of the physician that he
dreamed to become. The Court considered his scholastic record sufficient to justify the
assumption that he could have finished the medical course and would have passed the
medical board examinations in due time, and that he could have possibly earned a modest
income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that murder
and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed
good-paying jobs had they graduated in due time, and that their jobs would probably pay
them high monthly salaries from ₱ 10,000.00 to ₱ 15,000.00 upon their graduation. Their
earning capacities were computed at rates higher than the minimum wage at the time of
their deaths due to their being already senior agriculture students of the University of the
Philippines in Los Baños, the country’s leading educational institution in agriculture.

3.
Were the amounts of damages excessive?

The Pereñas plead for the reduction of the moral and exemplary damages awarded to the
Zarates in the respective amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that
such amounts were excessive.

The plea is unwarranted.

The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates’
deep mental anguish over their son’s unexpected and violent death, and their moral shock
over the senseless accident. That amount would not be too much, considering that it would
help the Zarates obtain the means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the amount as excessive might
prove to be an injustice, given the passage of a long time from when their mental anguish
was inflicted on them on August 22, 1996.

Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount
if only to render effective the desired example for the public good. As a common carrier,
the Pereñas needed to be vigorously reminded to observe their duty to exercise
extraordinary diligence to prevent a similarly senseless accident from happening again.
Only by an award of exemplary damages in that amount would suffice to instill in them and
others similarly situated like them the ever-present need for greater and constant vigilance
in the conduct of a business imbued with public interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision
promulgated on November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.
10.
G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,

vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party1 between a shipowner and a charterer transform a common carrier

into a private one as to negate the civil law presumption of negligence in case of loss or
damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation

(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which
the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned
by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A.,
to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-
1 signed by the master of the vessel and issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum"
pursuant to the Uniform General Charter2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan.3 Riders to the aforesaid
charter-party starting from par. 16 to 40 were attached to the pre-printed agreement.
Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the
18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds4 were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk
pursuant to par. 16 of the charter-party which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate

from National Cargo Bureau inspector or substitute appointed by charterers
for his account certifying the vessel's readiness to receive cargo
spaces. The vessel's hold to be properly swept, cleaned and dried at the
vessel's expense and the vessel to be presented clean for use in bulk to the
satisfaction of the inspector before daytime commences. (emphasis
supplied)

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids, covered
with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed
and tightly sealed throughout the entire voyage.5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds
into its steelbodied dump trucks which were parked alongside the berth, using metal
scoops attached to the ship, pursuant to the terms and conditions of the charter-partly
(which provided for an F.I.O.S. clause).6 The hatches remained open throughout the
duration of the discharge.7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it
was transported to the consignee's warehouse located some fifty (50) meters from the
wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale
where they were individually weighed for the purpose of ascertaining the net weight of the
cargo. The port area was windy, certain portions of the route to the warehouse were sandy
and the weather was variable, raining occasionally while the discharge was in
progress.8 The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets,
with an opening at the front where the dump trucks entered and unloaded the fertilizer on
the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the
trucks to contain spillages of the ferilizer.9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except
July 12th, 14th and 18th).10A private marine and cargo surveyor, Cargo Superintendents
Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by
taking draft readings of the vessel prior to and after discharge. 11 The survey report
submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the
cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo
delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and
dirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship
Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the
cost of the alleged shortage in the goods shipped and the diminution in value of that
portion said to have been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for
shortlanded certificate and not a formal claim, and that this "request" was denied by them
because they "had nothing to do with the discharge of the shipment." 14 Hence, on 18 July
1975, PPI filed an action for damages with the Court of First Instance of Manila. The
defendant carrier argued that the strict public policy governing common carriers does not
apply to them because they have become private carriers by reason of the provisions of
the charter-party. The court a quo however sustained the claim of the plaintiff against the
defendant carrier for the value of the goods lost or damaged when it ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is

presumed negligent in case of loss or damage of the goods it contracts to
transport, all that a shipper has to do in a suit to recover for loss or damage
is to show receipt by the carrier of the goods and to delivery by it of less
than what it received. After that, the burden of proving that the loss or
damage was due to any of the causes which exempt him from liability is
shipted to the carrier, common or private he may be. Even if the provisions
of the charter-party aforequoted are deemed valid, and the defendants
considered private carriers, it was still incumbent upon them to prove that
the shortage or contamination sustained by the cargo is attributable to the
fault or negligence on the part of the shipper or consignee in the loading,
stowing, trimming and discharge of the cargo. This they failed to do. By this
omission, coupled with their failure to destroy the presumption of
negligence against them, the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier
from liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968
case of Home Insurance Co. v. American Steamship Agencies, Inc.,17 the appellate court
ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a
private carrier and not a common carrier by reason of the time charterer-party.
Accordingly, the Civil Code provisions on common carriers which set forth a presumption
of negligence do not find application in the case at bar. Thus —

. . . In the absence of such presumption, it was incumbent upon the plaintiff-

appellee to adduce sufficient evidence to prove the negligence of the
defendant carrier as alleged in its complaint. It is an old and well settled rule
that if the plaintiff, upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner the facts upon which he bases
 his claim, the defendant is under no obligation to prove his exception or
defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing
Belen v. Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the
basis of its cause of action, i.e. the alleged negligence of defendant carrier.
It appears that the plaintiff was under the impression that it did not have to
establish defendant's negligence. Be that as it may, contrary to the trial
court's finding, the record of the instant case discloses ample evidence
showing that defendant carrier was not negligent in performing its obligation
. . . 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the
Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the
present controversy because the issue raised therein is the validity of a stipulation in the
charter-party delimiting the liability of the shipowner for loss or damage to goods cause
by want of due deligence on its part or that of its manager to make the vessel seaworthy
in all respects, and not whether the presumption of negligence provided under the Civil
Code applies only to common carriers and not to private carriers. 19 Petitioner further
argues that since the possession and control of the vessel remain with the shipowner,
absent any stipulation to the contrary, such shipowner should made liable for the
negligence of the captain and crew. In fine, PPI faults the appellate court in not applying
the presumption of negligence against respondent carrier, and instead shifting the onus
probandi on the shipper to show want of due deligence on the part of the carrier, when he
was not even at hand to witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private
carrier by reason of a charter-party; in the negative, whether the shipowner in the instant
case was able to prove that he had exercised that degree of diligence required of him under
the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases.
This being so, we find it fitting to first define important terms which are relevant to our
discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part

thereof, is let by the owner to another person for a specified time or use; 20 a contract of
affreightment by which the owner of a ship or other vessel lets the whole or a part of her
to a merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight; 21 Charter parties are of two types: (a) contract of
affreightment which involves the use of shipping space on vessels leased by the owner in
part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat
charter, by the terms of which the whole vessel is let to the charterer with a transfer to him
of its entire command and possession and consequent control over its navigation,
including the master and the crew, who are his servants. Contract of affreightment may
either be time charter, wherein the vessel is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the
charter-party provides for the hire of vessel only, either for a determinate period of time or
for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the
wages of the master and the crew, and defray the expenses for the maintenance of the
ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the
Civil Code. 23 The definition extends to carriers either by land, air or water which hold
themselves out as ready to engage in carrying goods or transporting passengers or both
for compensation as a public employment and not as a casual occupation. The distinction
between a "common or public carrier" and a "private or special carrier" lies in the character
of the business, such that if the undertaking is a single transaction, not a part of the
general business or occupation, although involving the carriage of goods for a fee, the
person or corporation offering such service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature
of their business, should observe extraordinary diligence in the vigilance over the goods
they carry.25 In the case of private carriers, however, the exercise of ordinary diligence in
the carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration
of the goods, common carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them.26 On the contrary, no such
presumption applies to private carriers, for whosoever alleges damage to or deterioration
of the goods carried has the onus of proving that the cause was the negligence of the
carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as
a common carrier, transporting goods indiscriminately for all persons. When petitioner
chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were
under the employ of the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the charterer did not have any
control of the means in doing so. This is evident in the present case considering that the
steering of the ship, the manning of the decks, the determination of the course of the
voyage and other technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when
the charter includes both the vessel and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charter-party
is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the
charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American
Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy
therein was the validity of a stipulation in the charter-party exempting the shipowners from
liability for loss due to the negligence of its agent, and not the effects of a special charter
on common carriers. At any rate, the rule in the United States that a ship chartered by a
single shipper to carry special cargo is not a common carrier, 29 does not find application
in our jurisdiction, for we have observed that the growing concern for safety in the
transportation of passengers and /or carriage of goods by sea requires a more exacting
interpretation of admiralty laws, more particularly, the rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-
law 30 —

As a matter of principle, it is difficult to find a valid distinction between cases

in which a ship is used to convey the goods of one and of several persons.
Where the ship herself is let to a charterer, so that he takes over the charge
and control of her, the case is different; the shipowner is not then a carrier.
But where her services only are let, the same grounds for imposing a strict
responsibility exist, whether he is employed by one or many. The master and
the crew are in each case his servants, the freighter in each case is usually
without any representative on board the ship; the same opportunities for
fraud or collusion occur; and the same difficulty in discovering the truth as
to what has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the
shipper or consignee should first prove the fact of shipment and its consequent loss or
damage while the same was in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss, damage or deterioration of the
cargo was due to fortuitous event, or some other circumstances inconsistent with its
liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April
1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo,
Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel were
cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's
holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with
three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches
remained close and tightly sealed while the ship was in transit as the weight of the steel
covers made it impossible for a person to open without the use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition,
foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside
the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives
of the consignee boarded, and in the presence of a representative of the shipowner, the
foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and
inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under
the watchful eyes of the shipmates who were overseeing the whole operation on rotation
basis. 34

Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by
the carrier in the care of the cargo. This was confirmed by respondent appellate court thus
—
 . . . Be that as it may, contrary to the trial court's finding, the record of the
instant case discloses ample evidence showing that defendant carrier was
not negligent in performing its obligations. Particularly, the following
testimonies of plaintiff-appellee's own witnesses clearly show absence of
negligence by the defendant carrier; that the hull of the vessel at the time of
the discharge of the cargo was sealed and nobody could open the same
except in the presence of the owner of the cargo and the representatives of
the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made
of steel and it was overlaid with tarpaulins, three layers of tarpaulins and
therefore their contents were protected from the weather (TSN, 5 April 1978,
p. 24); and, that to open these hatches, the seals would have to be broken,
all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis
supplied).

The period during which private respondent was to observe the degree of diligence
required of it as a public carrier began from the time the cargo was unconditionally placed
in its charge after the vessel's holds were duly inspected and passed scrutiny by the
shipper, up to and until the vessel reached its destination and its hull was reexamined by
the consignee, but prior to unloading. This is clear from the limitation clause agreed upon
by the parties in the Addendum to the standard "GENCON" time charter-party which
provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the
cargo was to be done by the charterer, free from all risk and expense to the
carrier. 35 Moreover, a shipowner is liable for damage to the cargo resulting from improper
stowage only when the stowing is done by stevedores employed by him, and therefore
under his control and supervision, not when the same is done by the consignee or
stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for
the loss, destruction or deterioration of the goods if caused by the charterer of the goods
or defects in the packaging or in the containers. The Code of Commerce also provides that
all losses and deterioration which the goods may suffer during the transportation by
reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for
the account and risk of the shipper, and that proof of these accidents is incumbent upon
the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage resulting
from the preceding causes if it is proved, as against him, that they arose through his
negligence or by reason of his having failed to take the precautions which usage has
established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer
shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical
engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting
mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea
also contains 46% nitrogen and is highly soluble in water. However, during storage,
nitrogen and ammonia do not normally evaporate even on a long voyage, provided that
the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr.
Chupungco further added that in unloading fertilizer in bulk with the use of a clamped
shell, losses due to spillage during such operation amounting to one percent (1%) against
the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages
is the clamped shell which does not seal very tightly. Also, the wind tends to blow away
some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by
an extremely high temperature in its place of storage, or when it comes in contact with
water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve.
But the salvaged portion which is in liquid form still remains potent and usable although
no longer saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign
particles was made greater by the fact that the fertilizer was transported in "bulk," thereby
exposing it to the inimical effects of the elements and the grimy condition of the various
pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water
to seep into the vessel's holds during the voyage since the hull of the vessel was in good
condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun
Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss
or contamination of the cargo, it was more likely to have occurred while the same was
being transported from the ship to the dump trucks and finally to the consignee's
warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of
CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order
cargo" as contained in their report to PPI was just an approximation or estimate made by
them after the fertilizer was discharged from the vessel and segregated from the rest of
the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded
her cargo. It rained from time to time at the harbor area while the cargo was being
discharged according to the supply officer of PPI, who also testified that it was windy at
the waterfront and along the shoreline where the dump trucks passed enroute to the
consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or damage. More so, with a variable weather
condition prevalent during its unloading, as was the case at bar. This is a risk the shipper
or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved
the inherent character of the goods which makes it highly vulnerable to deterioration; as
well as the inadequacy of its packaging which further contributed to the loss. On the other
hand, no proof was adduced by the petitioner showing that the carrier was remise in the
exercise of due diligence in order to minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals,
which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the
then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is
hereby DISMISSED.

Costs against petitioner.

SO ORDERED.